Debt issuance in Mena markets is likely to exceed $80 billion according to a white paper penned by a trio of asset managers.
The three firms, Dubai-based Emirates NBD Asset Management, Kuwait-based Kamco Investment Company and Swiss firm Fisch Asset Management, report that Mena hard currency bond and sukuk issuance reached $84 billion in 2018. Furthermore, demand for regional debt was oversubscribed by twofold.
This demand is likely to continue in 2019, states the paper, due to the upcoming inclusion of GCC bonds in the JP Morgan EMBI index which it believes will encourage $30 billion if inflows. In addition, continuing government reform agendas in the region will also help drive demand.
‘Mena Debt: an evolving world for fixed income investors’, also pushes the case for allocation to the asset class by stating that the GCC region’s share of global GDP is set to increase to 2% in 2019, from 1.8% in 2015
“Fiscal deficits for most Mena countries have been the reason for an increase in government debt, and this trend is expected to continue in 2019 – providing a fresh set of opportunities for investors,” says Faisal Hasan, head of investment research at Kamco.
“Reforms being implemented across Mena make it an attractive destination for global investors - spending on infrastructure remains a priority for policymakers and expanding the non-oil sector to diversify economies away from oil dependence has received support from almost all governments in the region.”
While the report pushes the case for increased or continued allocation, it does also present some potential downsides for investors to consider including geopolitical uncertainty, possible rating downgrades and the region’s over-reliance on oil as a revenue source.
©2019 funds global mena